A Bright Spot – China’s Economy in 2012

The Year of Dragon may indeed prove to be as auspicious as Chinese expect. Yesterday at a presentation, Mr. Murtaza Syed from the International Monetary Fund, predicted that China will remain a bright spot in a bright spot in an unpredictable global economy. China economic growth rate, although slowing down, will stay above 8%, while the global growth rate is expected to be around 3.3%.

“A robust corporate profitability and rising household incomes have compensated the slowed down export,” said Mr. Syed, the resident representative of the IMF’s Beijing office.

China will get hit hard if a storm emanates from Europe, China’s biggest trading partner which accounts for 50 % of total exports. On the other hand, China has room for fiscal response, said Mr. Syed.

IMF advises China to vigorously push domestic consumption and reduce investment, which has been a major force in driving the economy. If the high level of investment persists, it may undermine
sustainability.

China probably doesn’t need to maintain a double digital growth anymore. It’s a miracle that it did manage for such a growth for so long. A better quality and more balanced growth model probably matters more now.

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